Steve Bielby, co-developer of the proposed 39-level 309-unit project planned for 302 Queen St, said local buyers who had paid 10 per cent deposits were now being asked for 20 per cent and foreign buyers who had put down 20 per cent were now being asked for 30 per cent.

Steve Bielby who is involved in the restoration of the historic St James Theatre and the proposed 39-level apartment tower. Photo/Nick Reed

"If you're a foreign buyer, you were already at 20 per cent and now we have increased that to 30 per cent. Locals had been 10 per cent but are now 20 per cent. It's easy to walk away from a 10 per cent deposit if the market drops 20 per cent. It's a settlement risk - they're worried about people not settling," Bielby said.

Apartment prices are also being put up, buyers have been told of the project beside the theatre where Auckland Council has committed to contribute $15 million to the restoration.

St James' issues follow the cancellation of Avondale's big Flo apartment project, buyers at Rose Gardens at Albany being asked for more money and revelations that many others projects have been cancelled after construction prices rose and Australian-headquartered banks tightened funding lines due to unit oversupply fears across the Tasman.

Beilby said letters were sent on Monday and that deposits had been paid on 260 of the 309 units which Relianz plans to build.

"Relianz is facing significant issues obtaining and implementing satisfactory finance to allow the St James Suites project to continue to progress. You may have heard that this is a difficulty many New Zealand-based developers are currently experiencing," the letter said.

Watch: inside the historic St James theatre with Steve Bielby

Continued below.

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"Relianz has now done all that it can to endeavour to obtain replacement finance both here and offshore for the project. However, despite Relianz's best efforts, there still remains a significant project shortfall.

"Critically, for a project of this nature, funders require there to be sufficient project revenue to demonstrate there is a large enough contingency, and there must also be sufficient interest cover. The project does not meet these requirements and replacement funding is being denied.

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"The only way for replacement funding to be achieved is if there is a significant increase in the project revenue to meet these requirements. We understand this will be disappointing news to you," Relianz told buyers.

Buyers who have paid deposits have the option of a full refund, plus interest, should they decide not to reinvest.

New terms for the block designed by Paul Brown Architects demanded "an increase in the purchase price...an increased deposit percentage".

Bielby said last night demolition was completed of the old buildings on the site and he expected a head contract to be awarded soon.

"The consents are there and work will start early next year. The Lee family are confident it will go ahead," he said referring to major investors. "I'm confident it's going to go ahead. I don't see any reason why it would not," Bielby said.